Acquisition prices have slipped only fractionally in the private sector, compared to a sharp decline in average price-to-earnings ratios for quoted companies. BDO's Private Company Price Index ended last year at 13.8, which means on average private companies were being sold for 13.8 times their after tax profits. This is down just 0.4 on the previous quarter and still up by 0.6 over the ratio achieved 12 months before. By contrast, the ratio for publicly quoted companies fell to its lowest level in two years.

Jack Clipsham, head of corporate finance for BDO Stoy Hayward in Guildford, said, "Appetite for acquiring private companies in the UK remains strong. The current low-inflation environment is good for investment planning and making acquisitions and, therefore, the price buyers are willing to pay for good quality businesses.

However, concerns over equity markets, fears of a possible economic slowdown either side of the Atlantic and well publicised difficulties in certain sectors such as telecom and IT will inevitably make buyers more cautious. It is therefore more important than ever that sellers appoint experienced advisers to manage a structured auction process in order to obtain maximum value."

The BDO Private Company Price Index is widely recognised as the most authoritative source on private company values by market practitioners, including the Inland Revenue and other leading accountants.